Episode 033 – STRR – The Seven Steps to Start Up a BNBMay 07, 2021
In this Short Term Rental Revenue Best of... Michelle gives you the seven steps to starting your own STR and tells you what type of expenses you can expect when starting your STR business.
Plus, contest details are inside this episode! Enter to win BIG!! Go and Grow!
Transcript of this Episode:
Hi, this is Michelle, the master of money mindset, and you are listening to BNB dash boss podcast.
And in today's podcast, we're going to be doing a best of from the short-term rental revenue podcast, episode number four, which is the seven steps to start up and the real cost involved in starting up your first short-term rental. Take a listen and enjoy, but first our show today is brought to you by audible.
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You'll love audible. Right [email protected]. You can find our $7 courses available for you to try out, find out how to cohost, how to do rental arbitrage, or how to invest in real estate. We're all three, by going to B and b-boss.com and clicking on our store. And you'll find our $7 courses right there. Try us out.
You'll love it. You'll love those courses and they're only there for a limited time. So do it. Also, don't forget our contest. We've got our contest running right now in every week. We're picking a winner. And everyone's names are going to be put into a drawing at the end for a final prize of an Amazon Dodd with a little clock on it.
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I appreciate it. So please do take a picture of it. Send it over to me at Michelle at BNB dash boss. Let me know that you did, and we'll enter you in those drawings. How to make money with no money. There are a lot of ways to do that. I talked about that on previous podcasts, but. The one thing I wanted to do was cover the fact that I think it's better and you'll make more money.
If you have a little money to invest, this episode is going to cover that really, really well, because I'm going to give you the seven steps that I use when I create any short-term rental. And the costs involved. So this episode, the seven steps to a startup, I'm going to do a bonus session and I'll post that Monday for you, specifically, Kylie and anyone else who wants to listen to it with the detailed, detailed steps and costs of every little item that we just did for a new short-term rental that we have down in Tucson.
And so that will give you exactly the prices. I emailed Kiley this, but if anybody else wants it, just email me or message me. And I'll give you a little breakdown on an Excel spreadsheet, including the links to the places that I got them. If they're available, like if I got it at a garage sale, it's definitely not going to have a link to it.
But if I got it on Amazon I'll even include the link and you can get the product right there on Amazon. So I'm going to do a bonus podcast and I'll air that on Monday for you, Kylie and anybody else. Like I said, if you've got questions or something, just let me know the bonus episode, that'll be episode number five and that'll be the real life breakdown specifically because Kylie asked for it.
So that's for you, Kylie. All right. Let's break down the types of expenses really quick. We're just going to break it down into two categories. Obviously you can break expenses into a million categories, but right now we're just going to talk about two. One's going to be a one-time expense and one's going to be an ongoing expense.
You'll notice that a lot of these expenses, you might just occur them. One time. When you a secure a property, you know, the money that you put down for first and last and the security deposit, you don't have to do that every month. You will have to pay them the rent on it every month, unless you pay for it all at once.
I've done that with some properties, too. Some of those expenses are going to either fall under one of those two categories, a one-time expense or an ongoing expense. I love doing these little plans and pathways. I'm all about the pathways. And I did it as Stu McLaren. One of his courses called tribe and Stu does a pathway and there's a lot of people.
I mean, obviously everybody has done their own version of it, but I love Stew's because he made me do it visually. And now I'm totally in love with that process. I took that and I took a little of Brendon Burchard's training and Brendan always said, If you do a training, give people an S S S or, you know, some kind of process that all the steps began with the same letters.
So I'm going to do that for you right now. So what we're going to do is we're going to pretend that you're starting on this pathway to prosperity, and when you're starting out, you have no money and no properties. Okay. And then at the end of the pathway, we're going to picture this pathway and you can make it curvy or whatever you want to, but.
At the end of the pathway, you're going to have money coming in every single month. Right? You're going to create this residual income for yourself. And you're going to have tons of properties, not just properties that you rent, but eventually you'll have properties that you own as well, because that is going to be included in this whole process.
The first step of our seven step process, I'm going to go over the steps really real quick, and then we'll get real detailed about them. Okay. So the first is search. We're going to have, find and locate a rental property and do our due diligence when it comes to that rental property, making sure that there's no homeowners association or anything involved or city ordinances that prevents you from having a short term rental, then we're gonna secure the property.
And that means we're going to get a lease agreement and we're going to make sure that our lease agreement has been either written by or okayed with an attorney so that we specifically. Have in the contract that we are, you know, exactly what we're going to be doing with the property so that no one can later on act surprise, like you are going to rent that out and know that people do that too.
Believe me. So you want to make sure that you've got illegal lease agreement with an addendum, if you needed one, and then we're going to stage the property. We're going to take it and put furniture in it and dishes and all that stuff. Right. And then we're going to set it up. That means we're going to set it up with all the utility companies, gas, electric, internet, anything that you're putting in there.
You're going to set all that up on the cleaning companies. You're going to get your cleaning company site, your laundry company, all that's included in the setup, then you're going to sink and sell it. And that means you're going to go online and you're going to promote the, you know what out of it, probably on Airbnb.
That's my favorite place to go because you were a little by owner. VRVO. That is a great site and you can literally list your properties for a lot more money on beer at VO. And I don't know why I don't understand it. People pay more money there for the same properties, then you're going to systematize it.
That means you're going to automate everything so that it can operate when your not there. Okay. So that's systematizing and then number seven is shampoo, rinse, and repeat. You're just going to do this over and over. Once you get that property done. You're going to, when Isaiah shampoo it, you're going to clean it up, loosen up the tight end.
See what's working. What's not working constantly tweak it. You're going to rinse it all off. Get it nice and shiny so that it's working and running on its own all the little systems and processes. And then you're going to repeat it. And you're gonna go out and find another property and do that. So imagine if you will, and we can be really conservative here that you're making $500 a month cashflow after all your expenses.
So your net cashflow on a property would be about $500. Then how many of those properties would you need to make $5,000 a month? Yeah. Think, Ooh, that's a hard one, right? No, you just need 10, you need 10 properties like that, and you'll be making $5,000 a month. Now, what would $5,000 a month mean to you and your family?
It would probably make a huge difference. Actually. I remember there was a statistic and I've put it in one of my books about how less than $200 a month would have saved most people from losing their homes in foreclosure during the big crash, just an extra $200 a month. I know that seems like such a low number, right?
Like you could go up and get a little job at McDonald's for 50 bucks a week or gain a couple of days or something and have made that. But most people, if they only had $200 a month coming in, they would have been able to save their home from foreclosure. So imagine what your family can do with $500 a month or 1,015 hundred, 2,005,000, $10,000 a month.
The whole point of this is to just duplicate that process. And that's how it is with pretty much any time you do real estate, you're not going to buy one property, fix it up, put a renter in there and then go, well, that's it. That's my real estate investment right there. Isn't it pretty, it's making me about 150 $200 a month in cashflow and they're paying the rent and you're not going to like, just forget about it because.
Once you do that, you know, that you can just keep duplicating that process and making more and more money. Right. So let's get into all the steps. Okay. Step number one was search search and locate the property. Like I said, you were going to check all the rules and regulations check all the rules about short-term rentals.
And a lot of cities are now starting to have rules and regulations. You really need to check on that stuff before you sign on the dotted line. It's important. It's important to check about the HOA and it's important to double check before you sign the lease because people do, I don't want to say people lie about that stuff.
I would say that they. They may be misinformed or uninformed. Let's give them the benefit of the doubt. Maybe they just didn't know that their HOA had a rule about it. You're the one who needs to do the due diligence and call up the HOA. On a property that you're about to sign, lease with and make sure there's none your, the one who's going to have to call the city or the county and making sure that everything is in check, that you're following the rules.
Maybe you have to buy a permit or license or whatever it is. You're the one who has to do that. Don't ever leave any of that stuff up to anybody else, because this is your business, not their business. You need to cover your own assets. Okay. So that's very, very important. And you want to look for a location that's safe for guests.
When you pull up with a car. Or, you know, walk up or get dropped off by a Lyft or something that they don't go holy crap. Get back in the car, get back in the car. I have literally stayed at places that looks so awesome online. And they even have pictures of the outside of this property probably from 20 years ago.
And then when I got out, I was like, oh, heck no. And that's not what I said, but it was very similar to that. I'm not staying here. It's just not safe. I have my kids. Sometimes I even have my granddaughter with me. There's no way I'm staying. Someplace unsafe. So I want you to always think about, would you stay there?
Would you put your mom there, a woman that you love, like your daughter or your sister, would you want them to stay there? Would you want them to stay there alone? If you can't answer yes. To that, do not get that property. You need a safe location. You need a place and you need to check it day and night too.
There's a lot of locations that look really awesome during the day and they're completely empty, but then at night, oh my gosh. It's like. Day and night. Yeah, actually it's really like day and night, which is probably where they got that term from. Um, but you want to make sure that you check out the property at all hours on the weekends during the weekdays at night, during the morning, right?
You want to check it all out? You want to make sure it's a secure suite property. Okay. And that's going to be a one-time cost involved in searching for the property of your gas money and your time. Right. Just to go around and search for them. And. Check them out. You'll check them out online. Now, a lot of those questions, you can get those answered before you hop in a car, because when you're going to take a look at the property, you can ask about the HOA.
Now there's a couple of reasons why you might not want to do that when you're first getting into the business. I do only because my business I've been doing it for a long time. So I honestly. Don't care. And I have a lot of information for people beforehand, if they have any questions. So if a landlord would be iffy about it and you didn't want to bring it up right away, I can totally understand that.
But you know, the area, when you look at a property, so you can check on the HOA yourself, you can check on the city stuff before you go into your car and go for the ride. So don't waste your time. Going to a property that you already know is not going to work for you. That's a waste of time. Okay, so let's go to step number two, secure security and the property.
Now you've done all your due diligence, right? You're going to have your lease agreement. It's probably going to be written up by your attorney or some kind of agendum that you got online. We have those with our course, we provide those, but there's a lot of people who do, and you only have to do that one time.
That's a one-time fee. Your attorney draw that up for you. You can use that over and over and over and all your properties. You don't have to do that. Over and over and over again, right? Just one time you might have annual city permits or county permits or something that you have to pay. Those would be annual fees.
I'm going to put insurance in with our setups, but there's also going to be insurance. And I'm not going to go into that heavily right now, only because we've got a whole episode on that. But basically it wants you to remember that Airbnb has their own insurance policy. It's a, certainly a great policy, but it's not going to cover everything and it's all up to them.
Whether or not they cover anything. So you really want to have your own insurance policy and you want to make sure it's the right insurance policy. It needs to be for a short term, because if you just get like a renter's policy that covers the items that you own inside a property that you rent. But if you've opened that property up to other people as a short-term rental, That doesn't cover the fact that they might go in there and steal something.
So you want to make sure that you have the correct insurance. And like I said, we've got an episode completely and specifically all about that. Okay. So let's see the expenses that go in with that. You're going to have a one-time first, last and security deposit on most properties. And probably the one-time fee with the attorney, because like I said, you could use that form over and over again.
Then you're going to have the monthly rent. And again, the permits, if you have any of those, those are usually annual permits. All right, let's move on to step number three, that's going to be staging. That's going to be putting the furniture and stocking it and supplying it. It can be expensive. I'm going to be breaking in here just so that I can let you know that this is an older episode.
So back in the day when Airbnb was just air mattresses, right. And then it kind of evolved and people could at one time. Just go into a Goodwill and use that kind of furniture to furnish their properties. Now you cannot do that. I mean, it's just getting too, too competitive. So it is going to be a little more expensive than it used to be.
Not a little, probably a lot. You really have to have good quality furniture. You have to have beautiful furniture and your pictures are going to say a thousand words. People are going to look. At your pictures and at your reviews, those are the two things that they are going to focus on when they're looking at your property and your property better look like a magazine photo.
So from now on, we don't suggest that you go into a Goodwill or that you go to garage sales and pick up your furniture. You might be able to find some good fines and fix them up. But for the most part, you can't just use any old thing to create a BNB. That's going to make you a really good profit. You have to make it look nice.
So I'm just going to slide this in here and then we'll get back to the regular stuff. But do remember that the majority of this. Was what was that like three or four years ago? And things have changed a lot in that timeframe. So I just wanted to pipe in let you know that. Okay. But Y you can furnish an apartment pretty inexpensively.
I think the property that we did was around $3,000. I want to save $3,600 35, maybe 32. I can't remember off the top of my head, but. That will be in our extras, that we send you things to Kylie, you can get furnished apartments as well. And sometimes, I mean, obviously they charge more for a furnished apartment, but if you don't have the startup cash for the $3,000 or whatever it takes to stock up that apartment, it's going to save you a lot of money.
So basically just go for it. I mean, I would, sometimes I would rather pay all my properties in Florida. There's not one. There will be, cause we just got another one down in the keys and that one we're going to have to furnish. That will be the first apartment that I've had in Florida that I've ever had to furnish all of them.
I've purchased furnished, and they're stocked with everything. The sheets, towels, dishes, everything you name it. Those expenses are built right in. And I like them that way because it's easy, but we did it, like I said, we've got this step-by-step for the place that we did down in Tucson. And that's going to help you out a lot when you take that.
Most of those are one-time fees too. Others are not, we'll give you that complete breakdown in episode number five, the bonus episode, but some things that have to be replaced in time, too. I want you to remember that because. Sheets and towels, they wear out, they get soiled or raggy or start to wear too thin.
And you don't want those. So there's a lot of expenses that you're going to have to replace them. Not every month or something. They'll just have to be replaced in time. All right. Step number four is setting up. Now that's going to be the utilities, the permits, the licensing, the parking stickers, the insurance, your cleaning crew, your laundry crew, cleaning crew is number one.
If there's one VIP in your business, it's definitely going to be your cleaning staff. That's the thing. We've got a whole episode coming up on that because it's that important. Okay. You want the best cleaning company that you can have, and you want a relationship with that cleaning company. Those costs don't come out of your pay.
Anyway, when you work with Airbnb, for instance, if I'm renting out a property for $150 a night, my cleaning company might charge me a hundred dollars. For that property to clean it up, that fee is not added into my expenses in the $150 per night. It's actually a tag on fee at the end, a one-time tag on fee.
And you can put a lot of expenses in there. There's a lot of stuff that you can do and add in the few cents there. Okay. But you're going to be paid for your portion. Your cleaning company is going to get their portion, so you don't have to worry about charging. And doing a lot of math. They're just, it's going to be simple, simple math.
Okay. The deposits, obviously they're going to be a one-time deposit, but your utilities will be a monthly utility, the permits and stuff. They might be annual. The insurance. You can pay it annually every six months, sometimes monthly, whatever is best for you. Your cleaning crew. You're going to set them up with an auto payment system.
They're going to be hooked up to a credit card. So you never miss a payment because that's, like I said, you're a VIP one important company. You never want to screw those guys out of anything and you want to make sure they are paid every time on time. Mike companies withdraw the day that they're done cleaning and they've got a credit card linked to them, not just debit card, because I want to make sure that no matter what happens, those guys are covered.
Okay. And those are your setups. Now we're going to sink and sell it. And the cost for sinking and selling. That's listing your property on Airbnb taking pictures. Now, obviously you're going to take pictures of your property. Cell phones are amazing. The cameras inside a cell phone, just always make sure that you've got them in the horizontal position.
You know, like a landscaping position. And again, I'm breaking in here. I'm breaking in to tell you, you need to get professional pictures taken. If you are not good at taking pictures with your camera, it's about $150 for most properties and it's completely worth it. You need their lighting, you need their expertise and your bookings will be more than doubled using a professional photographer.
So I'm just bumping that in here. And now you want a really nice big picture because that's how they're posted later on. You can even get professional pictures taken, but why do that right away? Just save that money. Do it yourself. I changed my pictures in my posts almost daily. And I'm not even kidding.
I shuffle them around because it keeps my posts fresh. Like something was just changed and then it puts it up higher in the rank. And you're getting a lot of foot traffic in Airbnb. And like I said, those costs will come out of your bookings and stuff. Did I not say that? I'm wondering if I did. I did about the cleaning companies.
Okay. Step number six is systematize. And that's just going to be putting everything on automatic. There's a bunch of different online services where you can systematize and put your business on auto-pay. I'm popping in here again for you. I'm talking about companies that you put on autopilot that help run your BNB business, like systems and processes that make it easier for you.
And these are going to be really great companies, companies that I use for. Automatic pricing something like wheelhouse. My messaging is smart. BNB use noise aware and the stay fi and sync BNB to sync calendars. Those are the types of companies that you are going to start using. And there's a bunch of them.
When you go to our website, bnb-boss.com, halfway down the home page, you'll see a button that takes you to one of our directories and in the directories, everything has broken down by category and every category has a list of every possible business that you can possibly get for there. Plus, we are going to be putting on a little badge.
For the ones that we recommend and the ones that we use just in case, I mean, you don't have to use the ones that we use, but they're the ones that we use and we'd like them, everything is going to be in there. You'll be able to find a ton of information in there. And these are the processes and the systems and stuff that you absolutely should have.
It's going to make your business a lot easier. You won't have to think about the pricing when you use wheelhouse and that's used wheelhouse.com. They're a great company that does all your automatic pricing and smart BNB is your messaging service. So instead of you getting messages, Constantly and having to send out messages to your guests seven different times throughout their stay.
You've got a template that you put into smart BNB and it sends those out automatically. And that includes things like if somebody sends a question about maybe the internet code. Those key words will hit. And it can tell that they're asking for an internet code and it will send an automatic message and you don't have to worry about hiring a VA for all this stuff.
We used to always have to do that. I mean, until these companies came up, there's also a ton of businesses that will help protect you from having parties. Parties are becoming a huge problem and they're illegal and more and more states, more and more cities, more and more. . It's a real big problem for your neighbors too.
You want to be a good neighbor. So I recommend that you use one, if not two or several of the party prevention companies that we have companies like noise aware, stay fi party. Squasher. These are great companies. That will save you tens of thousands of dollars. If you think about the fines, the replacing of the items that are stolen or damage with a party and the cleaning fees, I mean, it can really add up.
So those companies are all in there too. So take a look inside our directory and that's what we put on automatic. So let's finish up here. All right. So those are my seven steps. I'm going to repeat them. Search secure stage, set up sink and sell systematize shampoo, rinse and repeat. Okay. Again, if you like our podcast, super excited that we're here and very, very grateful to all our new listeners.
If you've got any questions, post them, please. We need you to subscribe. We need you to leave reviews, but again, I'm super grateful. Episode five is going to have the real life break down. It's probably going to be a very boring episode because I'm going to go line by line for Kylie. Exactly the prices. If you guys message me, I'll send over that file right to you with a link on it.
I hope you enjoyed that episode are seven steps to starting up your short-term rental. And remember to listen on Monday when we drop a brand new episode for you, every single Monday, Fridays are best of. And I hope you have a great, great weekend. God bless you. Thank you for listening. Have a great day. Go and grow.
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